What If a Defendant is Bankrupt in My Buffalo Personal Injury Case is Bankrupt?

If you’ve been hurt in Buffalo because someone else was careless, the last thing you expect is for them to file for bankruptcy. You’re already dealing with pain, medical bills, and stress—now this? 

It’s frustrating, and it’s fair to ask: Does this mean you’ll never see the compensation you deserve? The truth? Bankruptcy makes things complicated, but it doesn’t always mean you’re out of luck. You’ve still got options. 

The personal injury lawyers at Horn Wright, LLP, understand how to navigate these challenges and fight for what you’re owed. Our team knows the ins and outs of injury claims when bankruptcy gets in the way. 

Let’s walk through what this means for your case and what you can do next.

They Filed for Bankruptcy—Does Your Injury Claim Stand a Chance?

Hearing that the person who hurt you declared bankruptcy can feel like a gut punch. But don’t assume it’s over. The type of bankruptcy they filed and how claims are classified will determine your next steps.

The Impact of Chapter 7 vs. Chapter 13

Most individuals file for one of two types of bankruptcy—Chapter 7 or Chapter 13. Here’s how each one could affect your claim:

• Chapter 7: This wipes out most unsecured debts, and the debtor’s assets might be sold off to pay creditors. Since most personal injury claims are considered unsecured debts, they could be discharged. However, exceptions exist.
• Chapter 13: This type of bankruptcy doesn’t erase debts—it restructures them into a repayment plan. That means you might still have a shot at recovering at least some of what you’re owed.

Secured vs. Unsecured Claims

The court will decide if your claim is secured or unsecured. Here’s the difference:

• Secured claims are backed by collateral, like a house or car. Personal injury settlements typically aren’t secured.
• Unsecured claims have no collateral backing them. That means they’re lower priority in bankruptcy proceedings and might get wiped out unless they qualify for an exception.

Can You Still Get Paid If They’re Flat Broke?

Not all debts disappear in bankruptcy. Some are protected under specific rules.

Exceptions for Personal Injury Claims in Bankruptcy

Under Section 523(a)(6) of the U.S. Bankruptcy Code, debts caused by “willful and malicious injury” aren’t dischargeable. If the person who hurt you acted intentionally—like in an assault or road rage incident—you can still go after them.

Similarly, if the at-fault driver was drunk or high when they caused the accident, your claim cannot be erased under Section 523(a)(9). In these cases, bankruptcy won’t stop you from pursuing what you’re owed.

The Automatic Stay: How Bankruptcy Slams the Brakes on Your Lawsuit

The second someone files for bankruptcy, an automatic stay goes into effect. This legal order puts your lawsuit on hold, whether you like it or not.

How Long Can an Automatic Stay Last?

It depends on the type of bankruptcy:

• Chapter 7: The stay usually lasts 3 to 4 months—until the case is discharged or closed (U.S. Courts).
• Chapter 13: The stay can drag on for years as the debtor makes payments under a court-approved plan.

During this time, creditors—including you—can’t take legal action to collect debts unless a judge allows it.

Motion to Lift the Stay for Claims

Here’s the good news: You can fight back. Filing a motion to lift the automatic stay asks the court for permission to continue your lawsuit. Judges often approve this for personal injury cases, especially if insurance money—not the debtor’s assets—will be paying the claim.

Filed for Bankruptcy? Here’s How Your Settlement Could Slip Away

If you filed for bankruptcy, your settlement might be at risk. Whether you get to keep it depends on whether it’s exempt or non-exempt under New York law.

Exempt vs. Non-Exempt Assets in a Settlement

• Exempt settlements: If your settlement covers medical bills, lost wages, or pain and suffering, you might be able to protect it from creditors.
• Non-exempt settlements: If your settlement is large and exceeds the exemption limit, creditors can take a chunk of it to pay off debts.

Buffalo’s Hidden Loopholes: Shielding Your Injury Settlement from Debt Collectors

A lump-sum payout isn’t your only option. Structured settlements—where you get paid in installments—can sometimes help protect your money from creditors.

Protecting Structured Settlements from Creditors

With the guidance of a skilled personal injury law firm, Buffalo residents can use structured settlements to make it harder for creditors to grab their funds. Since the money is distributed over time, rather than all at once, it’s tougher for collectors to get their hands on it. This strategy helps injury victims stay financially stable even when debt is a concern.

How Settlement Structuring Impacts Future Debt

Choosing a structured settlement can also help you qualify for government assistance and other financial benefits. Since you’re not receiving a lump sum, the payments might not count toward income limits for some programs.

Need Legal Help? Horn Wright, LLP Has Your Back

Bankruptcy doesn’t have to kill your claim, but it does make things messy. Whether you’re fighting for compensation from someone who declared bankruptcy or trying to protect your own settlement, you need a law firm in Buffalo that knows how to win in these tricky situations.

The Buffalo personal injury attorneys at Horn Wright, LLP, fight for victims every day. From car crash legal representation to workplace injury claims and even complex cases requiring a medical malpractice attorney, we’ve got you covered. 

We know the legal loopholes, the courtroom tactics, and the best ways to get you the compensation you deserve. Don’t let bankruptcy stand in your way. Contact our office today for your free consultation. 

Take back control of your case with one of the best law firms in America by your side.